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Investment products that focus on companies with women in leadership have been slow to garner interest, even amid a growing body of research showing companies with more female leaders tend to be stronger performers.

While the amount of money flowing into investments with a “gender lens” is growing, assets levels of products such as gender-focused exchange-traded funds (ETFs) are well below what many in the industry were expecting by now.

The level of investment in the Evolve North American Gender Diversity Index ETF (HERS) – the first gender-diversity ETF to arrive in Canada when it was launched in 2017 – has been a “really big disappointment,” said Raj Lala, chief executive at Evolve Funds Group Inc. The ETF tracks North American companies that have demonstrated a commitment to gender diversity as part of their corporate-responsibility strategy.

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“I think a lot of people think it’s the right thing to do, but I don’t think they can draw the line between increasing gender diversity and better overall stock performance,” Mr. Lala said.

With about $4-million in assets under management, Mr. Lala said the HERS fund has so far fallen short of expectations. The ETF rose by about 11 per cent over the past 12 months as of Nov. 15, trailing the S&P 500 Index’s gain of 16.2 per cent over the same period.

Evolve rolled out the fund amid an influx of studies in recent years showing companies that promote women into roles with decision-making power and influence outpace organizations without gender diversity.

Companies with female chief executives and chief financial officers outperformed the market average in terms of share price, according to a 2019 report by markets data and analytics firm S&P Global. The study found that in the 24 months after appointing female leaders, firms with women CEOs experienced a 20-per-cent increase in the rate that the stock price rose and companies with female CFOs saw a 6-per-cent increase in profitability.

Yet, some investors are reluctant, suggesting that the statistics could be attributed to a variety of factors unrelated to gender diversity, according to Mr. Lala. Evolve had numerous meetings with institutional investors to promote the fund and he said the feedback has been that organizations aren’t yet seeing a correlation between performance and gender diversity.

“They wondered whether the evidence was just coincidental that these companies have performed better and wondered how you really tie it to gender diversity,” Mr. Lala said.

Shortly after Evolve launched HERS, Mackenzie Investments introduced its own gender-lens product: The Mackenzie Global Leadership Impact ETF (MWMN). With about $9.8-million in assets, the fund invests in equities that include female board members and women on the senior executive team. Among the companies in the fund, women hold 38 per cent of the board seats and 31 per cent of senior management positions, compared with 25 per cent and 19 per cent, respectively, in the MSCI World Index.

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Mackenzie chief executive Barry McInerney said his firm didn’t launch the fund with an asset target, but would like to see it receive more interest. He believes that will require advisers to learn more about the value of gender-lens investing.

“These are new concepts and they require a lot of education,” Mr. McInerney said.

The performance of MWMN has trailed its benchmark, climbing 10.9 per cent over the past year as of Oct. 31, compared with the MSCI World Total Return Index’s 12.7-per-cent gain over the same period.

Still, interest in gender-focused investing is expected to increase. Assets under management in gender-focused products globally jumped to US$2.4-billion in 2018, up from US$100-million in 2014, according to a report by gender-lens investment accelerator Catalyst at Large and investment adviser Veris Wealth Partners.

Some funds are already beginning to generate more investment, such as the RBC Vision Women’s Leadership MSCI Canada Index ETF (RLDR), which has $162.6-million in assets. Launched in March, 2018, it tracks Canadian companies with a board that is 30-per-cent female or has at least three female directors. It also attracted the Ontario Municipal Employees Retirement System, which invested an initial $100-million into the ETF in 2018.

The fund – heavily weighted in financial and energy – climbed 11.2 per cent over the past year as of Oct. 31 according to RBC, surpassing the S&P/TSX Composite Index’s 9.7-per-cent rise over the same period. More investors are becoming comfortable with directing their money to support companies with gender diversity in senior management, said Mark Neill, head of RBC ETFs at RBC Global Asset Management.

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“Investors who prioritize women leadership in their values are able to directly reward Canadian companies who are [implementing] these values, and indirectly send a message to those that aren’t, and this is an incredibly appealing aspect of the fund,” Mr. Neill said in an e-mail.

The best way to attract more investment in gender-lens funds is to first make sure that advisory firms include just as many women as the companies in the ETF holdings, said Tanya van Biesen, executive director of Catalyst Canada.

“Retail investment products are often sold through intermediaries and that may not have the level of awareness around the fact that there are superior outcomes associated with companies that have gender-balance at the board and senior level,” Ms. van Biesen said.

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